Morning Commentary: Blowout Xerox deal on deck; investors chase new CoreCivic bonds

By Paul A. Harris

Portland, Ore., March 6 – After opening 1/8 of point higher on Wednesday, cash bonds were up 1/8 of point to ¼ of a point at mid-morning, trailing reports on U.S. employment suggesting that inflation continues to tame, sources said.

The high-yield CDX was up 1/8% at mid-morning, a market source said.

With the S&P 500 stock index up 0.45% at that time, the iShares iBoxx $ High Yield Corporate Bd (HYG) share price was 0.2% better, up 15 cents, at $77.25.

In the dollar-denominated new issue bond market, Xerox Holdings Corp. has the Wednesday spotlight to itself as it endeavors to print an issue of senior guaranteed notes due November 2029 (Ba3/BB).

The deal, which upsized on Wednesday morning to $500 million from $400 million, is a blowout, a trader said.

Official talk is 9% to 9¼%.

That’s inside of initial guidance in the mid-to-high 9% area, where the offer was heard to be four-times oversubscribed, the trader said, adding that investors are calling the deal “cheap,” professing to see fair value in the Xerox paper below 9%.

Turning to recent issues, the new CoreCivic, Inc. 8¼% senior notes due April 2029 (Ba2/BB-) were subject to hot pursuit from investors on Wednesday morning, trading at 102½ bid, 103 offered, the trader said.

That’s up from earlier levels at 101, or just above, the source added.

The upsized $500 million issue (from $450 million) priced at par on Tuesday, riding in on $400 million of reverse inquiry and playing to a “well-healed” book that was twice deal size, according to an informed source, who added that allocations were tough.

Citizens JMP Securities LLC was left bookrunner on the CoreCivic deal.

Meanwhile, the new Rithm Capital Corp. 8% senior notes due 2029 (B3/B-), which priced at 98.981, were plumbing the depths on Wednesday morning, changing hands at 97¾, said the trader.

That’s down from 98 bid, 98¾ offered late Tuesday, according to a portfolio manager, who suggested that if you’re looking for evidence that the new issue market is getting expensive, look no further.

The $775 million Rithm Capital issue priced on Tuesday.

Elsewhere, the Clear Channel Outdoor Holdings, Inc. 7 7/8% senior secured notes due 2030 (B1/B) were par 3/8 bid, par 5/8 offered on Wednesday morning, the trader said.

They were wrapped around par on Tuesday, sources said.

The $865 million issue priced at par on Monday.

Fund flows

High-yield ETFs sustained $76 million of daily cash outflows on Tuesday, according to a market source.

Actively managed high-yield funds saw $8 million of inflows on the day, the source said.

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